Qantas Airways Ltd., seeking to revive unprofitable international operations, is counting on five different airline units to win travelers in China, a country 60 times bigger than its home market.

The Australian company is forming a premium carrier in Southeast Asia and a budget venture in Japan that will give it bases closer to China, Chief Executive Officer Alan Joyce, 45, said in an interview in Sydney yesterday. The two new airlines, which begin flights next year, will add to Qantas' existing operations in Vietnam, Singapore and Australia.

"There is a huge opportunity for Qantas within the Asian markets," Joyce said. Having premium and low-cost units serving China and the rest of the region is "critical," he said.

Winning sales in the world's most populous country is central to Joyce's plans to turn around overseas operations losing around AU$200 million (US$207 million) a year because of competition from Middle East carriers on routes to Europe. Delta Air Lines Inc. and American Airlines have also added flights to China, where international air travel may grow 11 percent a year through 2014, according to the International Air Transport Association.

"I really think it is hard to over-estimate China's potential," said Peter Harbison, chairman of the Sydney-based CAPA Centre for Aviation. The country's size and rising intra- Asia trade provide "unbelievable upside internationally," he said.

Jetstar China

Qantas's low-cost budget arm Jetstar has led the Sydney- based company's growth in China by offering flights to eight cities from its hub in Singapore. The budget carrier's Vietnam unit also plans to add China flights, Joyce said. The main Qantas airline flies to Shanghai and Hong Kong from Australia.

Chinese services now represent more than 10 percent of Qantas's international revenue, compared with "low single digits" five years ago, Joyce said.

Qantas plans to order as many as 110 Airbus SAS A320s, including 78 of the revamped neo version, to support the new Southeast Asia premium carrier and the Japan budget venture. It announced the new international airlines last month alongside plans to pare flights to Europe and shed 1,000 jobs in Australia.

The job cuts bolstered calls by unions for job-security agreements that would limit the airline's ability to hire specialists such as pilots for the new Asian carrier.

Labor Talks

Joyce said the carrier may reach agreements with labor leaders by the end of the year. The company last month started talks with its long-haul pilots union with help from Fair Work Australia, the nation's industrial regulator.

"We are trying to get some leaders on the same page," Joyce said about labor groups. Still, "some of our unions regard a dollar of profit as enough and anything else as extravagant."

Qantas's net income fell 83 percent to AU$9 million in the six months ended June after disruptions caused by earthquakes in Japan and New Zealand, Cyclone Yasi in Australia and a plume of volcanic ash that drifted across the Pacific Ocean from Chile.

The carrier fell 1.6 percent to AU$1.495 yesterday Sydney trading. It has declined 41 percent this year, compared with a 27 percent drop for the Bloomberg World Airlines Index, which tracks 30 stocks.

Decision on Base

Qantas plans to make a decision on whether to base its new premium airline in Singapore or Kuala Lumpur within two months, Joyce said. Singapore has the advantage of a bigger business travel base, while Kuala Lumpur may offer less competition and the chance to work with Malaysian Airline System Bhd. (MAS) and AirAsia Bhd., he said.

Like all of the company's overseas operations, Qantas will work with a local partner on the new premium unit to get around international rules governing airline ownership. The Jetstar Japan venture will be part-owned by Japan Airlines Co. and Mitsubishi Corp.

Joyce founded Jetstar in 2004, four years after joining Qantas following stints at Aer Lingus Group Plc and Ansett, which was Australia's number two carrier before collapsing 10 years ago.